{"id":11432,"date":"2019-06-13T06:55:48","date_gmt":"2019-06-13T10:55:48","guid":{"rendered":"https:\/\/www.m2sys.com\/blog\/?p=11432"},"modified":"2022-06-15T07:27:08","modified_gmt":"2022-06-15T11:27:08","slug":"different-methods-customer-identification-kyc","status":"publish","type":"post","link":"https:\/\/www.m2sys.com\/blog\/biometric-software\/different-methods-customer-identification-kyc\/","title":{"rendered":"Different Methods of Customer Identification (KYC) and their Shortcomings"},"content":{"rendered":"

The customer identification process is globally known as KYC, which stands for Know Your Customer or know your clients. It is the process of identification and authorization of the customer considering risk factors related to the business. KYC is generally practiced by banking and financial institutions as part of the regulation of general banking and anti-money laundering activities. However, some enterprises are also practicing KYC to control the risk factors and ensure the anti-bribery compliant assessment with their clients.<\/span><\/p>\n

\"Different-Methods-of-Customer-Identificatio-and-their-Shortcomings\"<\/p>\n

Alternatives of KYC Process<\/b><\/h2>\n

In 2001, the banks in the US were mandated to maintain KYC to prevent money laundering. The process includes collecting the following documents from each client:<\/span><\/p>\n

    \n
  1. \u00a0\u00a0\u00a0\u00a0\u00a0<\/span>National Identification Card<\/span><\/li>\n
  2. \u00a0\u00a0\u00a0\u00a0\u00a0<\/span>Passport<\/span><\/li>\n
  3. \u00a0\u00a0\u00a0\u00a0\u00a0<\/span>Social Security Number<\/span><\/li>\n
  4. \u00a0\u00a0\u00a0\u00a0\u00a0<\/span>PAN Card<\/span><\/li>\n<\/ol>\n

    These types of documents or information are mandatory for any form of KYC process worldwide nowadays. Let\u2019s have a look into the different methods used for KYC and their shortcomings:<\/span><\/p>\n

    Paper-Based KYC<\/b><\/h3>\n

    From the very beginning, the process was practiced in the paper-based documentation system. This system required huge administrative costs and manpower. Moreover, the authority was continuing to find out the discrepancy in the financial statements and the investigation submitted the report that the people are using fake information for the KYC purpose.<\/span><\/p>\n

    Digital KYC<\/b><\/h3>\n

    Over a couple of years, digital KYC was introduced in the banking and financial sectors. This method uses a computer system to record all data of an individual to maintain a hassle-free and easy KYC process. Digital KYC is helping the industry to maintain accurate customer data, and regulatory requirements using a central system. But numerous issues like taking a long time for verification, troublesome API integration with the core system, prone to data breaches, and long queue because of ID verification are associated with this method.<\/span><\/p>\n

    Biometric Based KYC<\/b><\/h3>\n

    Biometric verification is simple and convenient for the end users and the most secure method of identification. No one can use the biometrics of others and it is almost impossible to forge the biometric data. And the authentication process is very simple to comply with KYC requirements. It eliminates the difficulties of compliance, record keeping, and repetitive document scanning. At the same time, seamless integration enables this method to work with the core system.<\/span><\/p>\n